Discussion Paper Series 2018-E-16

Macroeconomic Effects of Quantitative and Qualitative Monetary Easing Measures

Junko Koeda

We estimate a structural vector autoregressive model with an effective lower bound of nominal interest rates (ELB) using Japanese macroeconomic and financial data from the mid-1990s to the end of 2016. The estimated results show that the Bank of Japan's quantitative and qualitative easing (QQE) policy increased output via "pure" quantitative easing when the first-year's QQE level effect was controlled, complemented by qualitative easing. Our nonlinear counter-factual analyses show that raising the ELB or lowering an inflation threshold in forward guidance is not necessarily contractionary.

Keywords: effective lower bound of nominal interest rates; quantitative and qualitative monetary easing policy; forward guidance; structural vector autoregression; maximum likelihood

Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.

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